United States District Court, W.D. Pennsylvania
UPMC d/b/a UNIVERSITY OF PITTSBURGH MEDICAL CENTER, and UPMC ALTOONA f/k/a ALTOONA REGIONAL HEALTH SYSTEM, Plaintiffs,
CBIZ, INC., CBIZ BENEFITS & INSURANCES SERVICES, INC., and JON S. KETZNER, Defendants.
case arises from the acquisition of a healthcare facility in
Altoona, Pennsylvania. Plaintiffs allege that defendants'
actuarial valuation of that facility's pension plan
understated the plan's liabilities by $132.5 million, and
that this valuation caused plaintiffs to unwittingly assume
those liabilities. This opinion does not delve deep into
those allegations. Instead, it addresses a voluminous
discovery dispute between the parties-specifically,
plaintiffs' motion for protective order (ECF No. 53) and
defendants' motion to compel (ECF No. 56). For the
reasons below, both motions will be denied in part and
granted in part.
University of Pittsburgh Medical Center-UPMC-is a nonprofit
corporation that operates healthcare facilities in the
western part of Pennsylvania. UPMC is also the parent company
for numerous entities throughout Pennsylvania that provide
healthcare services. UPMC Altoona is one such entity. UPMC
Altoona operates healthcare facilities in and around Blair
County, Pennsylvania, and is headquartered in-as its name
suggests-Altoona, Pennsylvania. UPMC Altoona was known as
Altoona Regional Health System (hereinafter “Altoona
Regional”) until July 1, 2013, when it was acquired by
case stems from that acquisition. CBIZ, Inc. and its
subsidiary, CBIZ Benefits & Insurances Services, Inc.
(hereinafter “CBIZ B&I”), provide
retirement-plan services for organizations, including
services such as actuarial valuations, certifications and
statements of accounting liabilities, actuarial
determinations of legally required retirement plan
contributions, 401k plan designs, and insurance-benefits
consulting. From 2002 through February 2015, CBIZ and CBIZ
B&I performed actuarial valuations for Altoona
Regional's (and, after it was acquired by UPMC, for UPMC
Altoona's) two largest pension-benefit plans. In that
capacity, CBIZ and CBIZ B&I prepared certifications of
the liabilities of those pension-benefit plans and prepared
certain certified governmental filings regarding those plans
on behalf of Altoona Regional and UPMC Altoona. Jon S.
Ketzner is an actuary who was employed by CBIZ and CBIZ
B&I until his retirement in early 2015. For at least the
13 years prior to retirement, Ketzner was the lead (and only)
actuary to value the obligations and liabilities of Altoona
Regional's and UPMC Altoona's two largest
September 16, 2016, UPMC and UPMC Altoona filed this case
against CBIZ, Inc., CBIZ B&I, and Ketzner. Plaintiffs
allege that-from at least July 1, 2008, through February
2015- defendants failed to adhere to actuarial standards of
practice and that, as a result, they significantly
undervalued the obligations and liabilities of Altoona
Regional's and UPMC Altoona's pension-benefit plans.
Plaintiffs assert, among other things, that defendants
understated the plans' Projected Benefit Obligations-the
amount of money to be paid into the plans to satisfy all
pension entitlements-by roughly $132.5 million, and
overstated Altoona Regional's profitability as a result.
Plaintiffs assert also that UPMC purchased Altoona Regional
in reliance on defendants' erroneous valuations. UPMC
Altoona brings claims for professional negligence and breach
of contract against all defendants, while UPMC brings a claim
for negligent misrepresentation against all defendants.
Defendants moved to dismiss plaintiffs' claims and that
motion remains pending. In the meantime, discovery has begun
and is ongoing.
20, 2017, plaintiffs filed a motion for protective order (ECF
No. 53). Plaintiffs seek an order stating that they do not
have to respond to certain document requests and
interrogatories propounded by defendants. Plaintiffs argue
that these discovery requests are not relevant, unduly
burdensome, and not proportional to the needs of the case. On
July 21, 2017, defendants filed a motion to compel documents
from UPMC (ECF No. 56). Both motions are now fully briefed
and ready to be decided.
Jurisdiction & Venue
is a Pennsylvania nonprofit corporation with its principal
place of business in Pittsburgh, Pennsylvania. (ECF No. 1
¶ 1.) UPMC Altoona is likewise a Pennsylvania nonprofit
corporation, with its principal place of business in Altoona,
Pennsylvania. (Id. ¶ 2.) Plaintiffs allege that
CBIZ, Inc. is a Delaware corporation with its principal place
of business in Cleveland, Ohio, that CBIZ B&I is a
Missouri corporation (they do not mention CBIZ B&I's
principal place of business), and that Ketzner resides-and
presumably mean that he is domiciled-in Maryland.
(Id. ¶¶ 4-7.) Plaintiffs seek damages
“in an amount no less than” $142 million.
(Id. at 18.) Thus, this case is between citizens of
different states and the amount in controversy exceeds $75,
000. This Court therefore has subject-matter jurisdiction
over plaintiffs' claims under 28 U.S.C. §
1332(a)(1). And because a substantial part of the events
giving rise to plaintiffs' claims occurred in the Western
District of Pennsylvania, venue is proper in this district
under 28 U.S.C. § 1391(b)(2).
Rule of Civil Procedure 26 provides the general framework for
discovery in federal civil litigation. Rule 26(b)(1) defines
the scope of discovery as “any nonprivileged matter
that is relevant to any party's claim or defense and
proportional to the needs of the case.” This scope
formerly included matters that were “reasonably
calculated” to lead to the discovery of admissible
evidence, but Rule 26 as amended-and effective December 1,
2015- no longer includes this language. A matter is relevant
if “it has any tendency to make a fact more or less
probable than it would be without the evidence; and . . . the
fact is of consequence in determining the action.”
See Fed. R. Evid. 401. In determining whether
discovery is proportional to the needs of the case, courts
must consider “the importance of the issues at stake in
the action, the amount in controversy, the parties'
relative access to relevant information, the parties'
resources, the importance of the discovery in resolving the
issues, and whether the burden or expense of the proposed
discovery outweighs its likely benefit.” Fed.R.Civ.P.
provides the mechanism to compel discovery from a person or
party who refuses to provide discovery. The party moving to
compel discovery under Rule 37 bears the initial burden of
proving the relevance of the material requested. See
Morrison v. Phila. Hous. Auth., 203 F.R.D. 195, 196
(E.D. Pa. 2001) (citations omitted). If the movant meets this
initial burden, then the burden shifts to the person
resisting discovery to establish that discovery of the
material requested is inappropriate. Momah v. Albert
Einstein Med. Ctr., 164 F.R.D. 412, 417 (E.D. Pa. 1996)
(citation omitted). The person resisting discovery must
explain with specificity why discovery is inappropriate; the
boilerplate litany that the discovery sought is overly broad,
burdensome, oppressive, vague, or irrelevant is insufficient.
See Josephs v. Harris Corp., 677 F.2d 985, 991-92
(3d Cir. 1982).
26(c) authorizes a person or party resisting discovery to
move for a protective order. If the movant establishes good
cause for such an order, then the court may impose
restrictions on the extent and manner of discovery “to
protect a party or person from annoyance, embarrassment,
oppression, or undue burden or expense.” Fed.R.Civ.P.
26(c)(1). “Good cause is established on a showing that
disclosure will work a clearly defined and serious injury to
the party seeking closure.” Publicker Indus., Inc.
v. Cohen, 733 F.2d 1059, 1071 (3d Cir. 1984) (citation
omitted). This injury, too, must be shown with specificity;
“[b]road allegations of harm, unsubstantiated by
specific examples or articulated reasoning, ” do not
establish good cause. Cipollone v. Liggett Grp.,
Inc., 785 F.2d 1108, 1121 (3d Cir. 1986) (citation
omitted). Additionally, Rule 26(b)(2)(C) provides that-on
motion or its own initiative-the court must limit the extent
of discovery if it determines that “the discovery
sought is unreasonably cumulative or duplicative, or can be
obtained from some other source that is more convenient, less
burdensome, or less expensive, ” or that “the
proposed discovery is outside the scope permitted by Rule
Discussion & Analysis
motions are before the Court: plaintiffs' motion for
protective order (ECF No. 53) and defendants' motion to
compel (ECF No. 56.) Although there are some discrepancies
between the exact discovery requests addressed in the two
motions,  the dispute in both motions boils down to
an argument about whether the requests at issue fall within
the scope of discovery provided by Rule 26(b)(1). The Court
will thus analyze the motions together.
so, however, it is first necessary to know the exact
discovery requests that are disputed. The parties'
submissions are less than clear on this point; they cite
numerous requests throughout their motion and brief (ECF Nos.
53, 57), but both of their proposed orders (ECF Nos. 53-2,
56-2) include language regarding requests never explicitly
cited in their motion and brief. Because the parties'
proposed orders appear to be the most comprehensive listings
of the disputed requests, the Court will analyze the
parties' motions with respect to the requests referenced
in the proposed orders. These are defendants' requests
for production numbers 9-20, 35-44, 56, 69, 72-75, 78-81, 84,
92, and 94-98. (See ECF Nos. 53-2, 56-2.) Plaintiffs
also seek a protective order with respect to numbers 7-8 and
10 of defendants' interrogatories to UPMC. (ECF No.
is one more notable issue with the parties' motions.
Although their proposed orders give some guidance on the
disputed requests, the parties do not clearly connect their
arguments to specific discovery requests. Thus, when it is
not entirely clear which requests a specific argument applies
to, the Court will analyze the argument generally in an
attempt to clarify the scope of allowable discovery.
the parties' arguments are based on UPMC's
negligent-misrepresentation claim, it is useful to outline
the elements of such a claim under Pennsylvania law before
addressing the arguments. The Pennsylvania Supreme Court has
adopted § 552 of the Restatement (Second) of Torts for
negligent-misrepresentation claims like the claim in this
case. See Bilt-Rite Contractors, Inc. v. Architectural
Studio, 866 A.2d 270, 287 (Pa. 2005) (“we hereby
adopt Section 552 as the law in Pennsylvania in cases where
information is negligently supplied by one in the business of
supplying information”). Section 552 provides in relevant
(1) One who, in the course of his business, profession or
employment, or in any other transaction in which he has a
pecuniary interest, [negligently] supplies false information
for the guidance of others in their business transactions, is
subject to liability for pecuniary loss caused to them by
their justifiable reliance upon the information . . . .
(2) [This liability] is limited to loss suffered
(a) by the person or one of a limited group of persons for
whose benefit and guidance he intends to supply the
information or knows that the recipient intends to supply it;
(b) through reliance upon it in a transaction that he intends
the information to influence or knows that the recipient so
intends or in a substantially similar transaction.
establish liability under § 552, a plaintiff must show
that (1) the defendant was in the business of providing
information for the guidance of others, (2) the defendant had
a pecuniary interest in the transaction in which he provided
the information, (3) the information was false, (4) the
defendant failed to exercise reasonable care in obtaining or
communicating the information, (5) the plaintiff justifiably
relied on the information, and (6) the plaintiff suffered
injury as a result. See Excavation Techs., Inc. v.
Columbia Gas Co. of Pa., 936 A.2d 111, 115-16 (Pa.
Super. Ct. 2007). Implicit in this last element is a
causation requirement. See Bouriez v. Carnegie Mellon
Univ., 585 F.3d 765, 771 (3d Cir. 2009)
(“proximate cause is an essential element of both
fraudulent misrepresentation and negligent misrepresentation
claims” (citation omitted)); Gibbs v. Ernst,
647 A.2d 882, 890-91 (Pa. 1994) (describing elements of
negligent-misrepresentation claim under Pennsylvania common
law, including proximate-cause requirement).
§ 552 contains the elements of a
negligent-misrepresentation claim (with § 552(2)
limiting what kind of loss is recoverable), § 552B
governs the issue of damages for a
negligent-misrepresentation claim. Section 552B provides:
(1) The damages recoverable for a negligent misrepresentation
are those necessary to compensate the plaintiff for the
pecuniary loss to him of which the misrepresentation is a
legal cause, including
(a) the difference between the value of what he has received
in the transaction and its purchase price or other value
given for it; and
(b) pecuniary loss suffered otherwise as a consequence of the
plaintiff's reliance upon the misrepresentation.
(2) the damages recoverable for a negligent misrepresentation
do not include the benefit of the plaintiff's contract
with the defendant.
the Pennsylvania Supreme Court has explicitly adopted §
552, it has not-yet-adopted § 552B. Federal courts in
this circuit, however, have predicted that the Pennsylvania
Supreme Court would adopt § 552B if the issue presented
itself. See Brand Mktg. Grp. LLC v. Intertek Testing
Servs., N.A., 801 F.3d 347, 356 (3d Cir. 2015)
(“we predict that the Pennsylvania Supreme Court would
adopt § 552B”); Torres v. Borzelleca, 641
F.Supp. 542, 546 (E.D. Pa. 1986) (“It is this
Court's prediction, however, that the Pennsylvania
Supreme Court would follow [S]ection 552B . . . .”).
Because this Court agrees with that prediction-and because
both plaintiffs and defendants rely on § 552B
(see ECF Nos. 53 at 5, 57 at 4)-the Court applies
§ 552B here.
Defendants' Discovery Requests
to defendants, the disputed requests for production relate to
four categories of documents:
(1) post-acquisition documents regarding the financial
performance of Altoona [Regional], including the
consideration paid by UPMC, Altoona [Regional's] value,
and the financial benefit derived by UPMC from the
acquisition, (2) post-acquisition valuations and assessments
regarding Altoona [Regional's] impact on UPMC's
health insurance business, (3) specific limited documents
regarding similar acquisitions by UPMC involving defined
benefit plans, and (4) pension valuation reports prepared by
UPMC's own actuaries for UPMC's pension plans, apart
from Altoona [Regional].
(ECF No. 57 at 4.) Condensing a dispute about 39 document
requests to 4 categories makes it a lot more manageable, but
not all of the disputed requests support defendants'
categorization. For example, requests 9-19 and 94-97-which
defendants contend fall within the first two categories of
requests seeking postacquisition documents (see ECF
No. 56-2 at 1)-contain no language limiting the requests to
postacquisition documents. Some of these requests actually
disclaim such a limitation. (See ECF No. 56-1
¶¶ 9 (“2008 to present”), 10-11
(“2011 to present”), 12-13 (“2008 to
present”), 14 (“2011 to present”), 15
(“prior to and after the Acquisition”) 16-19 (no
temporal scope), 94 (“2008 to the present”) 96-97
(same).) Based on defendants' arguments, the Court
assumes that defendants are now limiting these requests to
postacquisition documents only. The Court will thus analyze
defendants' first two categories of requests accordingly.
Postacquisition Financial Information (Requests 9-20, 72-75,
92, and ...